Learn How to Make Your Business Run More Efficiently

This entry was posted on February 10, 2016 by Roble Velasco-Rosenheim.

During high school, a handful of my friends used to get together after class to watch movies in our school’s ever-warm auditorium. Always, there was ice cream.

In the fall, it was warm enough for someone to round up our cash, amble down to the grocer, and pick some buckets of Homer’s Strawberry Magic, (which continues to be a Chicago classic), but in the winter, nobody wanted to make the hike. So we Googled around until finding a few shops that delivered the stuff. The first few hits charged around 8 dollars per delivery (which was more than the ice cream itself), but eventually we found a place that did it for free. Magiano’s Corner Eatery was further away than the 8-dollar delivery joints, but they could deliver for free since they ran such a tight ship with their order processing. They kept our business for a solid four years. The free delivery was nice, but in the end, that wasn’t the only thing that kept us coming back. They had an amazing way of doing business; they had all of their services on line, and they never missed a beat. This was in the early years of online delivery, and they had already gotten it down to a science of efficiency.

Some ten years later, I live in Bangkok, and whenever I’m feeling nostalgic for the old crew, I place an order with Magiano’s, and smile when their “Your delivery will arrive in 30 minutes” email pops in. I know it’ll reach my friend’s apartment in under 20 minutes, every time. Magiano’s now has 8 locations around the city, but their service and quality haven’t suffered a bit – if anything they’ve gone up.

The online marketplace is changing fast, and businesses of all sizes need to find ways of keeping up with the current. We don’t all have access to Homer’s delicious Strawberry Magic, but any business can take a page from Magiano’s – we can all find ways of streamlining operations, enhancing efficiency, and optimizing the ways in which our business works.

Efficiency is Key:

Efficiency means producing either the same amount (or more) of a given output, while using fewer inputs to do so. The concept lends itself to nearly any industry, and can be used to strengthen strategic plans and optimize business operations. In the context of energy, efficiency can mean more electricity with less fuel; in farming, it can mean more produce in less space. With a bit of strategizing, and the willingness to modify outdated systems, companies stand to earn more money by reducing operating costs, time spent, and inputs used. Higher operational efficiency translates to higher profit, and in many cases, improved products and services.

Why Would a Company Overlook Opportunities to Become More Profitable?

After a few years working with clean-tech companies, I found myself head-over-heels with the concept of efficiency, so I started looking for ways of applying it to scenarios beyond energy -- it turned out to be just as relevant to my business development projects and life at large as it was to the clean energy sector. One day, I was trying to explain the concept to a friend who works in advertising, and who is obsessed with the idea “optimizing” how he lives and does business. Knowing just how to push my buttons, he asked a very pertinent question:

"Okay, so if [energy] efficiency is as good as you’re pitching it, why hasn’t it caught on across the private sector?"

The question bit me, but my buddy Bjorn was certainly right to ask it. At the time, I didn’t have a good answer. So I went back to the engineering firm that introduced me to the concept and asked them the same question. The answer, like its subject, turned out to be relevant far beyond its initial energy context. Why indeed do businesses underplay the value of becoming more efficient? Here’s a crude summary of their answer.

"In most cases, the first issue is that companies fail to recognize simple, low-cost methods of building operational efficiency – they’re just not looking in the right places. In others cases, the notion of any up-front cost is enough to deter management from considering products and services that could improve efficiency, even when they're proven to reduce operating costs and pay themselves off in comically short periods of time. Perhaps the most common reason that efficiency planning is overlooked, however, is that its results are 'less tangible', and accrue over time".

If You’re Not Operating Efficiently, You’re Wasting Time and Money:

Companies whose primary goal is getting as much money as possible, as quickly as possible, may take little interest in operational efficiency. They’re looking for the “upfront dollar”, and who am I to fault them? When a company is in it for the long haul, however....

A company that’s interested in growing over time, (and staying on top of an increasingly competitive market) needs to consider the flourishing of its component parts. This means factoring in immediate profits, sure, but it also means considering those “less tangible” gains that help optimize the company as a functioning whole. The following example should help frame this concept, and is followed by a few suggestions for improving operational efficiency for online retailers and ecommerce sites.

The Story of FRank and Frank:

Let’s start this example with a $20 sale, and assume it costs our protagonist’s company – we’ll call it FRank – $5 in advertising, and 1 hour in labor (at $10/ hour) to earn the sale and process the order. Okay, so FRank’s starting point, or benchmark, is $15 in operating costs, for every $20 sale. Cool, FRank is $5 richer! FRank is a for-profit company, and if it wants to grow, (which it does) it’ll need to make more sales. It can continue chucking time and money at advertising, and with a bit of luck (and no competition) it may just survive. Still, the outlook is bleak.

Time passes, and one day, as FRank’s founding manager – Frank – is knocking back some whiskey-with-waters at the local cantina, his friend, Perkins, rolls up with a bright idea. He urges Frank and FRank to consider being less drab. “How?” Frank asks. Perkins immediately orders him a rum-with-coconut-water, and suggests sheering some belly-fat (operating costs) off of FRank. He also urges Frank to wear one less button, buttoned up. Perkins notes that a minor change to operations – say an upgrade in software – may have an ugly up-front cost, but could also shave a few hours off the team’s working week. Heck, it might even free up the FRank team to start thinking laterally about business development, instead of just operating to survive.

So, Frank (now three years into running FRank, and well on his way to a midlife “new car”) decides to splurge, and spend $100 on a sparkling new “efficiency tool”. The software has been around for a few years, has a ton of good reviews, and most importantly, promises to save him and his team a few hours on everyone’s least favorite task – spreadsheet management! The almost-immediate result is that each team member spends 30 minutes less time processing each sale, while continuing to deliver the same results. A few of the "less tangible" effects are that the team starts talking to each other during lunch, smiling (even when it isn’t required of them), and yes, using saved time to begin scaling the business. Also, Frank stops buttoning his shirts so tightly, and finds himself out of breath much less often.

The payback, you ask? Well, The upfront $100 is paid off in the first 20, 30-minute increments that FRank doesn’t waste on spreadsheet management. After the first 20 sales, the investment is paid off, and everything after that is… sweeter than ice cream. (Again, fewer buttons).

You Don’t Need to Un-Button to Be Like FRank and Frank. (But it Helps):

Obviously, the example above has been doctored up to illustrate a point, but the story at root stands true to experience (as does the picture). Time wasted on tasks that can be automated and/or streamlined is a silent killer. If your team is burning hours on dragging and dropping addresses, trying to find threads from old chats, or crawling through shipment and order information, you're hemorrhaging resources! Each company has its unique operational habits, and as such, will find different ways of addressing efficiency, but at root..

In many cases, increased efficiency can be addressed at little, or no cost at all. In others, minimal investments can completely reinvent team dynamics, business operations, and show almost immediate returns. Some of the most frequently referenced efficiency pressure points for ecommerce sites looking to optimize are: shipment and inventory management, finance and payment processing, and international team management. Bellow is a quick list of websites and software which are designed to alleviate these burdens, and make business work better while wasting fewer resources. If you haven’t addressed these “low-hanging fruits”, you’re missing out. Go forth, and enjoy!

Optimizing Ecommerce Sites:

Moogento: The first-stop resource for increasing productivity, saving time, and building profit, for all companies using Magento.

ShipEasy: Simplifies order processing, period. It also simplifies handling multiple orders, and offers customizable order pages.